On August 23, ISDA published the 2010 HIRE Act Protocol, which addresses the changes in law effected by the HIRE Act, enacted on March 18.  The HIRE Act could impose U.S. withholding tax on payments under an equity swap that are determined in part based on dividend payments on a referenced U.S. equity security.  The HIRE Act provisions generally are effective on any swap after September 14, regardless of when the swap was entered into.  The protocol (i) eliminates the normal gross-up that would apply for withholding tax purposes, (ii) allows for termination of a swap if payments become subject to withholding under the HIRE Act provisions, and (iii) amends payee representations to account for the HIRE Act. ISDA Release.

See Orrick’s Financial Markets Alert of April 1, 2010 for additional background regarding the HIRE Act.